Whose Money Is It Anyway ?

I am not an economist.
Neither do I subscribe to The Financial Times nor to The Economist. Nor do I care to seriously read  any of the salmon colored newspapers.

 Despite all of this, I am amazed at how, in the very recent past, there has been a flood of articles, op-eds, stories, blog posts, tweets and re-tweets on the rise in income inequality.  Outrage seems to be on how we have allowed capitalism to grow into the form that it is today - which is killing equality, destroying the world’s ecology  and causing severe environmental degradation .The manner in which there is an overzealousness in  natural resource exploitation , one would imagine that  our natural capital is here for us to last till perpetuity.
The rise of disparity of incomes is not limited to countries such as India, where there has been a history of  stark inequality, but the rise of income inequality is growing notoriously in developed countries such as the US and UK. A recent study done in the US showed that the top 1% households' income grew by 275% - this is just one revealing statistics – there is a lot  more data out there to show that more wealth is shifting to fewer  people, with few bankers having a disproportionate control  over the economy.  As a recent New York Times article puts it – it has been the era of the rise of the super rich. If not the ultra-rich.

Forbes annually tallies the fortunes of the world’s billionaires. The world’s 1,210 current billionaires, Forbes reported in March 2011, hold a combined wealth that equals over half the total wealth of the 3.01 billion adults around the world.  Something is seriously going wrong. Despite India s economy growing anywhere between 7% and 8 % in the last few years, income inequality has doubled in 20 years. Surely, GDP growth cannot be the only measure of development and progress or for that matter prosperity.
Nevertheless, why is all this happening? What are we missing that is driving this rapaciousness? Is it because of our inability to perceive the difference between public benefits and private profits?

I have come to see this polarisation more acutely and closely over the last 12 months in my work with the Karnataka Growers Federation.   I have been working extensively with the small to medium-sized coffee farmer in the southern state of Karnataka. Coffee is now big business in India.  According to India’s Coffee Board, domestic consumption has been witnessing a steady growth of five to six per cent in the last five years. And we can see this – almost all of urban India today is dotted with coffee bars. Coffee is the preferred choice for the upwardly mobile and uber cool. With the ubiquitous Café Coffee Day, Baristas, Costa Coffee, and the much awaited entry of the more expensive Starbucks into India, the latte and cappuccino are here to stay.

The world has been gulping down so much coffee that  it is now the second most globally traded commodity after oil.  But coffee is one of the few internationally traded commodities that is still mainly produced not on large estates or plantations but on small holdings. The economies of the some of the poorest countries are highly dependent on trade in coffee –in some African countries like Ethiopia and Burundi -but the producer today hardly makes a living from his or her coffee bean, given their small holdings – the majority being anywhere between 2.5 acres  to10 acres.

 The story is no different in India.
Contrary to popular perception, 98.5% of coffee growers in India are small farmers. Today India produces 4.5% of the world’s coffee. This is good news – to some.

The bad news is that coffee is produced by 90 countries globally but consumed by just 40 countries. The global coffee trade today is close to USD 96 billion. Of this USD 96 billion trade, a meagre USD 8 billion comes back to coffee-producing countries. There is not a chance in hell that the farmer, who produces coffee on say a  10 acre holding, has any control on the market prices or access to any share of this mega profit. The producer s share of this profit is unusually low while the usual suspects in between and at the end, laugh all the way to bank. The world’s big four coffee roasters  also have big coffee brands – and therefore enjoy huge margins - while the producer benefits the least. Squeezing the small farmer for the lowest possible price – in the long run is a bad business idea – it will drive the coffee farmer out of business.

Coupled with no control over prices, there is another challenge facing the farmer today – that of unseasonal rain and unpredictable weather patterns. Whilst climate change is just one of numerous factors that may affect global coffee production, the International Coffee Organization considers it will likely be one of the most important ones with smallholders (who produce the majority of the world's coffee) the most vulnerable group.  In Karnataka, the state that produces about 70% of India’s coffee, there were 3 years of continuous drought during the coffee season from 2002 to 2005 followed by heavy rainfall in 2006 and 2007. This lead to severe infestation of pest and disease, like stem borer and leaf rust, which resulted in huge crop loss.  For the first time we heard of suicides among coffee farmers.

When it comes to coffee, India is unique. It is the only country on the world map that grows  all its coffee in the shade. Indian coffee is  grown in forest like conditions –verdant and rich in biodiversity. India also grows both the varieties of coffee – Arabica (Coffea Arabica) and Robusta(Coffea robusta). Arabica is high-end coffee – it is rich and yet delicate in flavour and therefore  commands a higher price.  Robusta is the low-end variety – it  is hardier but commands a lower price. One would think that Indian farmers would want to grow Arabica and get a higher price for their coffee bean. But sadly the trend is the reverse. Arabica-growing farmers instead are opting out of this highly-flavoured cherry to grow the Robusta variety (which requires less care), partly because the Arabica plant cannot stand up to climate variability and unpredictable weather patterns.  And this is the other thing – we are now drinking more and more coffee but of less and less quality.  
So whether Arabica survives or not, or whether farmers only grow Robusta because they have to, I know that if Baba Budan were around today, he would have probably been a very rich man.

For the love of coffee

Before the Café Coffee Days, there was Baba Budan and his 7 coffee beans.

Baba Budan, a 17^th century Sufi Saint, smuggled 7 coffee beans into India from Yemen, thereby, part breaking the Arab monopoly over coffee. The story goes that Baba Budan smuggled out 7 coffee beans from Al Muckha (Mocha), a port city in Yemen. Between the 15^th and 17^th century, Mocha was the main market place for coffee trading. It is from this Red Sea port of Mocha, that the English word mocha has its origin.

Coffee arabica plant and seed

While the earliest history of coffee goes back to antiquity - there is evidence that point to the existence of the coffee plant in 13^th century Ethiopia. Till the mid 17^th century or so, the Arab rulers enjoyed their monopoly over coffee. They did what they could to ensure that the cultivation did not spread – so they would strip the bean of its outer layer, roast it  and render it infertile. They banned the export of the coffee bean – it could be taken out only if it was boiled or roasted so as to prevent the bean from germinating. Coffee had been colonized.

This is why Baba Budan, an Indian pilgrim to Mecca, had to smuggle his 7 beans out of Yemen. It was not just Baba Budan who broke the coffee colonization, there was fierce competition between the European colonizers to get hold of coffee. It was the Dutch who in the late 17^th century first managed to get some seeds and attempted to grow coffee in their colonies.   The Dutch were by now already growing some coffee in the Malabar region of India as well as in their other far eastern colonies.  And before you knew, the British started coffee plantations in Jamaica -the rest is cruel ,colonial  history.

There are myriads of stories of how coffee found its way out of Arabia and how it was transported by colonizers, travelers, wanderers, investors ,missionaries   and traders  – with the rise in the demand for coffee, came a rise in the demand for sugar, both becoming important commodities. Coffee was a commodity that formed part of the trade triangle – from England to Africa to the Americas. Coffee houses sprang up and became meeting places and were centers of social interaction.

But behind all this energy and movement, the story is really not sweet. The well-known coffee historian, Antony Wild, in his book “Coffee :  A Dark History”, takes us to the early days of the history of coffee, on how the, European merchants came across it in Arabia and brought it to Europe. Soon hugely popular, they quickly realized that they could make more money if they planted coffee themselves, in their plantations, using slave labour in their tropical, colonial outposts. Coffee was now on its way to becoming global – from the colonies in Caribbean to  the colonies in Java – coffee was leaving its footprint.

As Antony Wild says, this is the legacy of coffee – tropical countries produce it and rich countries drink it. Even today this legacy is almost true . Quite unlike tea – countries that produce tea mostly drink it.

Meanwhile, on his return to India, after Mecca, Baba Budan planted the Arabica  beans in the hills of Chandragiri, situated in today's Chikmagalur district of Karnataka– and thus is the story of the birth of Indian coffee. Today ,India produces almost 4.5% of the world’s coffee, grown mostly by small and medium growers, and is grown mostly in the three main Southern States of Karnataka, Tamil Nadu and Kerala, with Karnataka contributing to 72% of what is grown. (A little bit is also grown in the Northeast and Andhra Pradesh). With the rise of urban India there is a rise in coffee shops – coffee bars are becoming ubiquitous in urban India. 


The once less known South Indian filter "kaapi" , served piping hot in steel tumbler with a small dabarah (cannot find a similar word in English) for cooling, has now morphed into  cappuccinos and lattés , finding its way onto menus across India’s burgeoning cities and youth.

India’s coffee is both special and unique  - right from its planting to its traditional style of drinking.  And that is really the idea behind this blog post. It is not to re-tell the well known but bitter history of coffee but more to inform about its current crisis and uncertain future.

Indian coffee is the finest shade growing coffee in the world and it is rare because all the coffee grown in India ,is grown in natural conditions , is dependant on monsoon rain and thrives in shade growing areas. There are close to 250,000 coffee planters in India – of which 98% are small farmers, cultivating on less than 10 hectares. There is almost no mechanization – it is labour intensive , employing about 2 million people  directly thereby generating rural livelihood.

Drive through any coffee growing district in South India – From Coorg to Chikmagalur and what you will discover are verdant coffee forests, acres of coffee estates full of all kinds of   trees with coffee growing under a thick canopy of natural shade, often mixed with ginger, pepper and vanilla . With most of the  coffee estates located in the Western Ghats, coffee forests are located in biodiversity hotspots that have a high level of endemism, bio diversity and wide array of flora and fauna. From Indian mahogany, to teak and  sandalwood , to the silver oak, and white cedar, trees stand majestically  tall . It is almost as if the forests nurture and protect the coffee berries  . Maintaining forests ensure a healthy coffee crop and the coffee planters almost has a sacred relationship with nature. There are wide species of  butterflies and birds . Protected wildlife parks often dot the region. Elephants wander about, sometimes destroying coffee plants  - the  famous langur, slender loris, ,spotted deer are some of the animals that live in the region.

And here’s the other thing – five major South Indian rivers have its origin in coffee estates, the most popular one being the  River Cauvery -that starts in the coffee growing region of Coorg.  Here the river is venerated and worshipped as Goddess Cauvery – as a protector of their land.  Coffee is so closely linked to the elements – and over time the coffee growers have developed  a deep tradition to preserve   rivers and forests.

But the picture is not  about the sweet fragrance of the coffee plant in bloom or misty rolling mountains. It is about a rapid change in climate that has resulted in rising temperatures and unseasonal  rains , sometimes heavier rainfalls , periods of   drought and flooding ,prolonged higher day time temperatures and sudden drop in night time temperature – all climatic impacts  that have resulted in lowered yields that are making coffee cultivation almost economically unviable.  There is a growing need to invest in technology to adapt to changing and unpredictable weather patterns but since the farmer is small, these are not always accessible or possible. There is a shift that is taking place. Slowly growers are selling their estates, part by part, the price the land fetches for the timber it holds, is more profitable than cultivating coffee in a climate changing world. More worrying is that there are no takers in the next generation as high profits on coffee cultivation start to dim.

So is coffee all about  about cash and commerce ? Is its  value limited to   commodity indices  and high menu prices? Does no one recognize its intrinsic value and its role in maintaining  biodiversity, acting as a carbon sink, globally sequestering about 6 billion kgs of carbon,  and  conserving wildlife and ecosystems ?The value of coffee lies way beyond  its economic price tag – its value in providing ecological services is indeed priceless.

During my recent visit to Chikmagalur, I met a coffee planter who said that he himself had personally planted over 100,000 trees in his life time –  this was way before the world was hot on climate change , carbon trading and clean development mechanism. And standing on his coffee estate I thought to myself - indeed these small planters are not Gordon Gekko s children !

The silent coffee planter that protects India s rich biodiversity and forests, does not need   a trading mechanism to protect our natural resources and create a better world. What he needs is for his voice to be heard while a different crisis brews.

It is indeed time to wake up and smell the coffee.